Target: ₹991
CMP: ₹855.65
Voltas is India’s leading air conditioning and engineering services company. In Q1-FY24, it derived around 75 per cent of its revenue from the unitary cooling products (UCP) segment and 33 per cent from electro-mechanical projects and services (EMPS). Revenue surged 21.7 per cent YoY to ₹3,335 crore in Q1-FY24, driven by growth in the UCP and EMPS segments. UCP revenue is expected to remain subdued in Q2-FY24 owing to the rainy season. However, it will start picking up from Q3-FY24 onwards as demand rises during the festive season
Better working capital management, incentive schemes across sales channels, a growing network of exclusive brand outlets, and tie-ups with modern and retail channels are expected to drive overall performance in the long term.
Additionally, cost efficiency measure and softening of commodity prices are expected to support margin in the future. Voltas market shared improved sequentially during the quarter and upcoming festival season expected to drive overall demand from Q3FY24 onwards.
Therefore, we upgraded our rating to Buy on Voltas with a target price of ₹991 based on 42x FY25E adj. EPS